GM expected to report its smallest quarterly profit in a year

Article by Christian A., on February 24, 2011

It’s expected that when General Motors Co. releases its fourth-quarter financial results, it will post its smallest quarterly profit in a year as costs for the development and the launch of new vehicles grow. Based on the average of seven analysts' estimates compiled by Bloomberg, its fourth-quarter net income may be $1.06 billion.

With this profit, GM would have its second-weakest quarter since it emerged from bankruptcy in July 2009, and would be higher than its tragic $3.22 billion loss a year earlier. GM is revamping a lineup that’s older than those of rivals such as Ford Motor Co. CEO Dan Akerson is demanding that the new models are introduced quickly.

GM's spending on cars such as the Chevrolet Volt plug-in hybrid and future products may result to higher costs similar to those that limited profits at Ford and Daimler AG.

David Whiston, an equity analyst at Morningstar Inc. in Chicago, said that both Daimler and Ford “got pinched quite a bit” during the fourth quarter because of higher launch costs.

He said that he expects to see the same thing happen at GM. However, the last quarter for GM may be strong enough to help it post its largest annual profit, excluding gains recorded when it emerged from bankruptcy in 2009, since its predecessor posted earnings of $6 billion in 1999.

According to the average of five analysts' estimates, GM’s net income in 2010 may be $5.38 billion. When Chief Financial Officer Chris Liddell was interviewed last month, he said that fourth-quarter earnings will be lower than in earlier periods last year partly due to higher engineering spending. [via autonews - sub. required]

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